ESG resilience: Exploring the non-linear effects of ESG performance on firms sustainable growth

Tanveer Bagh (), Bingjun Zhou, Suha Mahmoud Alawi and Rauf I Azam

Research in International Business and Finance, 2024, vol. 70, issue PA

Abstract: Using a sample of United States (US) and Chinese listed firms from 2018 to 2022, we investigate the non-linear effect of overall ESG performance on the firm’s sustainable growth. Additionally, our analysis involves the decomposition of ESG into its environmental, social, and governance components to examine their individual effects on sustainable growth. High Dimension Fixed Effects, and dynamic panel generalized method of moments key findings reveal a positive effect of overall ESG performance on sustainable growth but as ESG performance increases, the positive impact on firms sustainable growth diminishes and eventually turns negative, indicating an inverse U-shaped relationship. Furthermore, our findings show that not all ESG components exert an equivalent influence on sustainable growth. Specifically environmental and social performance have a greater effect on sustainable growth, highlighting the unequal impact of different ESG dimensions. Sub-sample analysis further accentuates the concept of an optimal level of ESG performance. These findings persist across various measures, estimators, and subgroup analyses. Overall, the results reveal novel non-linear patterns in ESG performance, providing valuable insights for management, investors, and policymakers.

Keywords: ESG performance; Sustainable growth; Non-linear effects; Listed firms (search for similar items in EconPapers)
JEL-codes: G30 G32 M14 Q01 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:70:y:2024:i:pa:s0275531924000989

DOI: 10.1016/j.ribaf.2024.102305

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